The Final Word on the "Make-Whole" Premium in Energy

One of the hottest topics of late in Chapter 11 cases has been the rights of noteholders to liquidated damages under "make-whole" provisions upon the automatic acceleration of debt in a bankruptcy. The issues that have been addressed include the right of secured noteholders to a premium when their debt is refinanced in a DIP financing, whether noteholders can include a make-whole liquidated damages amount in their claim and whether the automatic stay should be lifted so that the bankruptcy acceleration can be rescinded (or damages awarded based on the stay of the rescission right). These issues have been the subject of a number of recent decisions, including in the Energy Future Intermediate Holding Co., LLC Chapter 11 Proceeding in Delaware.